B.B. Vagyani, J.
1. The petitioners seek to challenge the legality and validity of recovery orders dated February 11, 1988 issued by respondent No. 2, under Section 45-B of the Employees' State Insurance Act, 1948.
2. In brief, the facts giving rise to the present writ petition are as under :
3. The petitioner No. 1 is the Co-operative Society which is registered under the Maharashtra Co-operative Societies Act, 1960. The petitioner-Society is engaged in the work of providing different services to its clients and customers such as Security Service, Transport Service, Canteen Service etc. The petitioner Nos. 2 to 25 are its working Members. The total number of Members of the Petitioner-Society is around 190, out of which, work of supervision and office administration of the Society is done on Honorarium basis, by the petitioner Nos. 2 to 25. The petitioner Nos. 2 to 25 are doing honorary work for the petitioner No. 1 -Society, by accepting Honorarium.
4. The membership of the Society is restricted only to the retired Officers of Army, Air Force and Navy and such Officers of the Armed Forces, who cease to be in employment on account of disablement and wives of such Officers who are no more alive. However, beyond the Commissioned Officers' Category, the Membership of the Petitioner-Society is not opened to anybody else.
5. The petitioners state that they employ about 900 employees who are engaged in various activities and these employees are covered by the Employees' State Insurance Act and that there is, no dispute whatsoever between the petitioners and the respondent No. 1-Corporation in respect of these 900 employees. Apart from these employees covered by the State Insurance Scheme, the respondent No. 1 ESI Corporation is claiming contribution under the Act in respect of the Working Members, figure of which vary from 1960 till now. The petitioners tried to convince the respondent-Corporation that the Working Members of the petitioner-Society are not employees and that there is no Employer-Employee relationship between the petitioner-Society on one hand and the petitioner Nos. 2 to 25 on the other hand. The petitioners also brought to the notice of the respondent-Corporation that the Working Members perform the work voluntarily for the petitioner-Society and for which they are paid only Honorarium. The payment of Honorarium is dependent on the profits and the petitioner-Society reserves the right to reduce the quantum of Honorarium also. The Honorarium is paid according to the Section 65 of the Maharashtra Co-operative Societies Act, 1960.
6. Being not satisfied with the representations made by the petitioners, the respondent No. 1 has issued final Orders, both dated February 11, 1988, which are annexed to the writ petition as Exh. A & B, respectively. In the final Order at Exh. A, the Collector, Pune City, has been asked to recover a sum of Rs. 11,609 from the petitioner-Society as arrears of land revenue, as provided in Section 45-B of the Employees' State Insurance Act, 1948 (hereinafter referred to as Act of 1948) r/w Section 5 of the Revenue Recovery Act, 1890. By the final Order dated February 11, 1988 at Exh. B, the Assistant Regional Director, asked the petitioner-Society to pay the contribution to the tune of Rs. 42,278.22 ps. for the period from April, 1978 to June, 1986, together with interest, amounting to Rs. 17,986.34 ps., upto December 31, 1987.
7. Feeling dissatisfied with the final Orders with regard to the recovery of amount of contribution referred to above, the petitioners have invoked the jurisdiction of this Court under Art. 226 of the Constitution of India and thereby challenged the legality and validity of the final recovery Orders dated February 11, 1988.
8. It is contended by the petitioners that as per the Resolution passed on November 6, 1977, in the 5th Annual General Body Meeting it was first time decided to pay Honorarium to the Working Members of the petitioner-Society. According to the petitioners, it is permissible to receive the payment of Honorarium as contemplated under Section 65(2) of the Maharashtra State Cooperative Societies Act. The petitioners reiterate that there is no Employer-Employee or Master-Servant relationship between the petitioner-Society and the petitioner Nos. 2 to 25. The petitioners further contended that the amount of Honorarium paid to the petitioner Nos. 2 to 25 is not wages. Moreover, there is no contract of employment between the petitioner-Society and its Working Members. The petitioner Nos. 2 to 25 are not at all covered by any Labour Legislation such as Shops and Establishments Act, 1948, Factories Act, 1948, Payment of Bonus Act, 1965, Payment of Gratuity Act, 1972 and Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The petitioner-Society has no disciplinary control over the Working Members. Thus, there is a total absence of relationship as that of Master-Servant in between the petitioner-Society and the petitioner Nos. 2 to 25. Under the circumstances, the demand of contribution made by the respondent No. 1 is beyond the scope of the provisions of Act of 1948 and therefore, the impugned final orders dated February 11, 1988 are illegal and invalid. The petitioners have made a grievance that the decision of respondent to claim contribution from the petitioner-Society is taken mechanically and arbitrarily without application of mind to the provisions of Act of 1948. The petitioners claim that the provisions of Act of 1948 are not at all applicable to the petitioners, so far as the payment of Honorarium paid to the Working Members is concerned.
9. The petitioners had filed appeal against the decision of respondent to the Director General, Employees' State Insurance Corporation, New Delhi. The said appeal filed by the petitioners was rejected and the decision of the respondent has been confirmed.
10. One Mr. Mirchandani Deputy Regional Director, Employees' State Insurance Corporation has filed affidavit in reply and thereby denied the averments made by the petitioners in the writ petition. It is contended in the affidavit in reply that the petitioner-Society is a legal entity distinct from its shareholders and members. The petitioner Nos. 2 to 25 worked in two independent capacities viz. (i) as a member of the Society, and (ii) as the employee of the Society and therefore, there exists relationship between the petitioner-Society and its members as that of Employer-Employee. It is made clear in the affidavit in reply that the first recovery Order for Rs. 11,609.50 ps. dated February 11, 1988, is for the period from November, 1976 to March, 1978 and second recovery Order for Rs. 218.22 ps. dated February 11, 1988 is for the further period from April, 1978 to June, 1980. It specifically denied in the affidavit in reply that an amount of Honorarium paid to the Working Member of the petitioner-Society is not wages within the meaning of Section 2(22) of the ESI Act, 1948. According to the respondents, Honorarium is a remuneration payable to the Working Members in cash in terms of the contract of service. It is said in the affidavit in reply that both the final orders with regard to the recovery of the contribution are perfectly legal and valid.
11. We heard Mr. Abhay Kulkarni, learned Advocate for the petitioner, Mr. H.B. Mehta, learned Advocate for the respondent No. 1 and Mr. C.R. Sonawane, learned A.G.P. for the respondent-State.
12. Mr. Abhay Kulkarni, learned counsel for the petitioner, submits with zeal at his command that petitioner Nos. 2 to 25 are not at all employees of the petitioner No. 1--Society. According to him, the petitioner Nos. 2 to 25 do not fall within the meaning of definition of employee, as laid down in Sub-clause 9 of Section 2 of the Act of 1948. He also submits that honorarium paid to the petitioner Nos. 2 to 25 is not wages, as defined in Sub-clause 22 of the Section 2 of the Act of 1948. Under the circumstances, the action of recovery of amount of contribution initiated by respondent No. 1 is bad in law and illegal.
13. Shri H.V. Mehta, learned Advocate for respondent No. 1 vehemently submitted before us that the working members of the petitioner No. 1 -Society squarely fall within the ambit of sub-clause 9 of the Section 2 of the Act of 1948 and therefore, Sub-section (22) of the Section 2 of the Act of 1948 comes into play. As per the definition, as provided in Section 2(22) of the Act of 1948, wages include all remuneration paid or payable in cash to an employee. This being the position, petitioner No. 1-Society, which is the employer, is required to pay contributions in the first instance, as per Section 40 of the Act of 1948. The petitioner No. 1-Society has failed to pay contributions as per Section 40 of the Act of 1948. The contributions payable under the Act of 1948 is liable to be recovered as the land revenue, by virtue of Section 45-B of the Act of 1948. Pointing out these legal provisions, the learned counsel for the respondent No. 1 submits that the action of recovery initiated by the respondent No. 1 is perfectly legal and valid. In support of his submission, the learned counsel for the respondent No. 1 has relied upon Employees' State Insurance Corporation, Trichur v. Taj Textile Industrial Co-operative Society Ltd., Calicut, 1980 LIC 1301 and The Kunnathunad Chalakudy Sau Kethika Co-op. Society Ltd. v. The Regional Director, Employees' State Insurance Corporation, Trichur : (1989)IILLJ27Ker . By making a reference to the above cited cases decided by the Kerala High Court, learned Counsel Shri Mehta concludes that the petitioner Nos. 2 to 25 are employees of the petitioner No. 1 Society, as defined in Sub-section (9) of Section 2 of the Act of 1948. This being the position, the petitioner Nos. 2 to 25, being the employees of the petitioner No. 1 -Society, are liable to be insured under the provisions of the Act of 1948. Mr. Mehta also submits that there exists relationship as that of employer and employee in between the petitioner No. 1 -Society on one hand and the petitioner Nos.2 to 25 on the other hand.
14. We gave anxious consideration to the rival submissions made at the Bar.
It is an admitted fact that no salary is paid to the Working Members of the petitioner-Society, From the copy of the Resolution dated November 6, 1977 it is clearly seen that the petitioner-Society has decided to pay maximum Honorarium of Rs. 1,500/- per month inclusive of the Conveyance Allowances, to its Working Members. It is also admitted fact that only ex-members of the armed forces are eligible to become the Working Members of the Society.
15. According to Mr. Abhay Kulkarni, learnedcounsel for the petitioner, out of the net profit ofthe petitioner No. 1-Society, honorarium can bepaid to the working members, as per Section 65(2) of the Maharashtra Co-operative Societies Act.In order to support his submission, learned Counselfor the petitioners drew our attention to the casedecided by the Division Bench reported in KumariJethi Shipahimalani v. Maharashtra Stale Co-operative Tribunal 1974 MLJ 550. The learned,counsel for the petitioner specifically drew our'attention to the resolution No. 13, dated November6, 1977 and submits that in case of loss,honorarium payable to the working members is tobe reduced. The learned counsel for the petitionerssubmits that honorarium paid to the working,members is flexible and fluctuating as per theprofits and loss incurred by the petitioner No. 1-Society. The learned Counsel Mr. Abhay Kulkarnibrings to our notice a case decided by the DivisionBench of Andhra Pradesh reported in the case ofEmployees State Insurance Corporation,Hyderabad v. Laxmi Powerlooms Society Ltd.,Warangal 1986 LIC 370. Heavily relying onthis case, Mr. Abhay Kulkarni, learned counsel forthe petitioners wants us to hold that the petitioner Nos. 2 to 25 are not employees within the meaningof sub-clause 9 of Section 2 of the Act of 1948and the honorarium or remuneration paid to theworking members i.e., petitioner Nos. 2 to 25 isimmaterial.
16. In order to appreciate the issue involved in this case, one is required to resort to the exact meaning attached to the word employee in the light of Sub-section 9 of Section 2 of the Act of 1948. The person would be termed as an employee where he had to be employed in or in connection with the work of establishment which expression ropes in wide variety of workmen who might not have been employed in the establishment but may be engaged only in connection with the work of establishment. We are well aware that the Act of 1948 has been engrafted in the statute book as a beneficial piece of legislation. The Law Courts would be loath to interpret or construe the section in the strictest forms. We are also aware that narrow and pedantic approach in regard to the construction of statutory instruments or provisions ought not be allowed in the case of interpretation of a statute which has been engrafted in the statute book as a beneficial piece of legislation. The expression in connection with the work, appearing in the first limb of the Sub-section (9) of the Section 2 of the Act of 1948, is wide enough to rope in persons who are engaged in work which is merely ancillary, incidental or relevant to or linked with the object of the establishment. All such persons fall within the first limb of the Sub-section (9) of the Section 2 of the Act of 1948. Keeping in view the legal position as pointed out above, we now proceed to examine the issue involved in this case.
17. It is interesting to note that the working members are partners of the petitioner No. 1-Society. The petitioners have brought this fact to the notice of the Director General, Employees' State Insurance Corporation, New Delhi, by their letter dated April 3, 1987. The working members are governed by the obligation of their partnership of the co-operative society to assist in managing the affairs of the Society, for which they are paid honorarium. It doesn't constitute service and the assistance rendered by the working members is rendered without entering into any contract of service. There is no contractual obligation on the part of the working members of the petitioner No. 1-Society. Moreover, they are not at all subject to disciplinary control like an employee. This is also material to note that the working members i.e. petitioner Nos. 2 to 25 are retired Class-1 Commissioned Officers of the armed forces. By the way, the petitioners have also brought to the notice of the Director General, Employees' State Insurance Corporation, New Delhi, that Statutory Auditor of the Co-operative Department of the Government of Maharashtra, who audited the accounts of the petitioner No. 1-society, has contended that the Act of 1948 is not applicable to the working members of the petitioner No. 1-Society. Another salient feature of this matter under consideration is that the working members i.e. petitioner Nos. 2 to 25 of the petitioner No. 1-Society are not covered by any other labour legislation such as Shops and Establishments Act, 1948, Factories Act, 1948, Payment of Bonus Act, 1965, Payment of Gratuity Act, 1972 and Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
18. The material placed on record doesn't at all go to show that the petitioner No. 1-Society have any disciplinary or supervisory control over its working members. If these salient features are taken into account, prima facie we are of the opinion that there lacks the employee-employer or master-servant relationship in between the petitioner No. 1-Society on the one hand and its working members i.e. petitioner Nos. 2 to 25 on the other hand. In the absence of such relationship, the petitioners are not liable to fasten with any liability of contribution under the Act of 1948.
19. Having regard to the features pointed out above we are inclined to confer with the decision, of the Division Bench of Andhra Pradesh reported in the case of Employees State Insurance Corporation, Hyderabad v. Laxmi Powerlooms Co-operative Society Ltd. Warangal (supra).
20. The jural relationship of master-servant cannot be attributed to me petitioner No. 1-Society on the one hand and its working members i.e. petitioner Nos. 2 to 25 on the other hand, merely because working members happened to work for remuneration.
21. At this stage, we cannot ignore that the object of formation of the petitioner No. 1-Society. The object of the petitioner No. 1-Society aims at improving the conditions of the members. There is no element of profit making. In our considered opinion the working members of the petitioner No. 1-Society don't at all fall within the meaning of the Section 2(9) of the Act of 1948. The honorarium paid to the working members, therefore, cannot be termed as wages, as defined in Sub-section 22 of Section 2 of the Act of 1948.
22. In the result, the petition succeeds. We hereby set aside and quash the impugned recovery orders dated February 11, 1988 i.e., Exh. A and B. The respondent No. 1 is hereby directed not to recover any contributions relating to the members of the petitioner No. 1-Society. Accordingly, rule is made absolute with no orders as to the costs.